Looking for a nice squeeze that can run some more? Try Valeant Pharma (VRX) (August 09, 2016)
VRX
We’re looking at Valeant Pharmaceuticals ( NYSE:VRX ), otherwise known as an Ackman slayer. This company has lost, at one point, I want to say like 90 percent, 93 to be almost exact, of it’s market cap. That will make anybody have a bad day. As you probably know Bill Ackman has basically ridden this all the way down insisting that he’s right and I’m sure he’s right about something, but being long Valeant Pharmaceuticals ( NYSE:VRX ) is not one of them. But with that said, the stock has been trading sideways for a while and then they report earnings, right? They stunk up the joint. And why did the stock go up? Well, I will tell you. Because they maintained their full-year guidance. They didn’t lower their guidance.
They said, “Okay, well we had some stuff going on, but we’re keeping out guidance the same.” And they also reported that they were going to be finding ways do reduce their debt. That’s also a good thing. Okay, great! You’ve got two things going on. But here’s the third thing, They got an unsolicited offer for their core assets. That’s kind of a big deal. To me that’s bigger than anything else. Who knows whether they’re going to accept it? If I’m them, I would take it in a heartbeat. But from a technical standpoint, here’s the thing: The stock is up at the top of the range right now because of this unsolicited offer thing. Unless there is a specific price that’s agreed upon, and I haven’t seen anything in that regard. But unless there’s a been a price that’s been agreed upon I think this stock can continue to move a bit.
So what I would suggest doing is (lets look at a 15-minute chart, this shows after hours stuff), you can see on the 15-minute chart, the stock just has been trading in a series of higher highs and higher lows. I would stick with that. You may even want to zoom out come tomorrow, you may want to zoom out to an hourly chart. But what I’m trying to do is keep you in this trade. This is a heck of a move, it’s up 25 percent in a day. At least we know Ackman can eat tonight. But this is a real bonafide breakout from a really tight volatility squeeze, this is what you’re looking for. This is the type of move that you’re looking for, and they don’t come that often. So you can take this stock, even tomorrow, buying this stock tomorrow.
This would be my criterion, it’s pretty simple: It closed at 28.16, it needs to be above that level. It needs to stay above that level, otherwise it’s suspect. That’s not to say that if the stock moves down and you buy it, the stock won’t just continue to move higher. I’m just talking about a specific trade parameter, and that is that you’re buying this stock because you believe that this is the first day of a multi-day move. It’s out of a volatility squeeze, tight volatility, boom! The stock is up, closed above the upper Bollinger Band, coming out of a squeeze. I’m buying this stock.
What’s it take for me to say, “Oh my gosh! I think I’m wrong.” Here’s what it’s going to take: It’s going to take the stock coming down so that we’re getting a ‘one day wonder’. So I don’t need to have a stop down here at 22.00 before I’m going to know that I’m wrong. If I think this stock is going higher, and I do, then I need two things to happen. The first is, it needs to be above the closing price. The second thing is, it needs to stay above this level right here, maybe even higher. So if those two conditions are met, I’m long the stock and I’m going to enjoy the ride with Bill Ackman. Nice to be him, nicer to be us.
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